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Scale matters on Madison Avenue, and it matters on Hollywood Boulevard too — but in a different way.
The recent flurry of media companies coming together — Vox Media and New York Media, Vice Media and Refinery29, Whistle and Vertical Networks, Group Nine Media and PopSugar — may stem from the pressure that Google and Facebook have put on their respective advertising businesses. The consolidation stands to also help these companies in their forays into streaming and TV programming.
The streaming market is already considered by entertainment industry experts to be tilted toward the sellers, as distributors look to line up loads of programming that will have subscribers lining up for their services. Vice, Vox Media, Whistle and Group Nine are already vying for those dollars through their respective entertainment businesses that produce shows to sell to TV networks and streaming services.
Expanding the types of shows and corresponding audiences that these publishers-slash-producers can pitch to streaming services is “absolutely something that’s at play [in these M&A deals]. We’d be hard-pressed to ignore just how much money is pouring into the content arms race,” said Michael Cohen, president of Whistle. New York Media, Refinery29, Vice Media, Vox Media declined to comment for this article. Group Nine Media did not respond to a request for comment as of press time.
“There’s this voracious demand for content during these streaming wars, and all these companies that we’re talking about are consolidating to better address that need,” said Peter Csathy, founder of media advisory firm Creatv Media.
New York Media had already been looking to capitalize on distributors’ programming needs before it had considered doing the deal with Vox Media, according to a person familiar with the publisher’s entertainment business. For years, New York Media has been mining its back catalog for articles that could be adapted into shows and movies, such as the recent hit “Hustlers.” But it wanted to be more than an intellectual property oil field. So this year, before it had begun any deal talks with Vox Media, New York Media began to talk with WME — which also represents Vox Media — about hiring the Hollywood talent agency to help the publisher become more of a producer, said this person who added that the publisher is in active conversations about 15 different scripted projects. Becoming a part of Vox Media will help New York Media to further its position as a producer because, while New York Media does not have physical production capabilities, Vox Media does.
“Operationally, the management of all the content and the demands on you to satisfy that demand becomes an increasingly important issue. It’s not just the talent in front of the screen and behind the screen but the talent that’s running the ship,” Csathy said.
In addition to capitalizing on streaming services’ programming needs, the media companies could use the consolidation of their production companies to address their own needs to reduce their reliance on advertising revenue. Publishers may be popping up subscription and commerce businesses in an effort to diversify their revenue streams in the long run. However “they need money coming in right now. So it is prudent for them to refine their creative chops and go sell to Quibi, HBO Max, Snapchat Discover, whoever is buying and have money that’s coming in — because a lot of venture capital is drying up — and use this production financing to actually fund the business [in the interim],” said Chris Erwin, principal and founder at strategy advisory and publishing company RockWater Industries.
In other words, if companies like Quibi are handing out checks to seemingly everyone for every kind of show appealing to all kinds of audiences, why not hold out as many hands as any one (combined) company can? And if the streaming wars are heating up to the point that companies are willing to sacrifice revenue in the name of corporate rivalry, why not try to be a mercenary arms dealer?
However, for these publishers to take fuller advantage of this seller’s market, they need to be able to produce a fuller slate of shows. Vox Media may be able to successfully pitch distributors on explainers and cooking shows given its track record of creating those types of programs for the likes of Netflix, PBS and Hulu. But it would have a harder time persuading streaming services that it could develop a scripted show or a series centered on women’s issues. That’s where Vox Media’s April acquisition of Epic — which is producing a scripted show for Apple TV+ — and now New York Media, which owns The Cut, comes in.
Vox Media “didn’t have a dedicated, strong female storytelling brand the way that The Cut is and now they do,” said a person familiar with Vox Media’s entertainment business. Similarly, Vox Media may have Polygon, which originated as a gaming publication and has broadened into covering more general entertainment, but it doesn’t have the strong voice or recognizable brand of New York Media’s Vulture.
“The Cut is a place where it’s immediately apparent how [the combined companies] would be able to create editorially driven, long-form programming in the same way that the Vox DNA comes through so strongly in [its Netflix series] ‘Explained,’” said the person familiar with Vox Media’s entertainment business.
At the same time as the consolidation could help these publishers score more production deals, it could also help from a defensive standpoint as buyers’ interests shift. Buyers may turn to a media company like Vice when they’re in the market for documentary-style news programming, but they’re unlikely to ask the publisher to come in to pitch a beauty show.
“If Netflix or Snapchat or whoever say they are going to spend more in this genre, it puts the niche players in a difficult position,” said Eunice Shin, a partner at consulting firm Prophet.
A year ago, Whistle Sports could have been easily described as niche. But late last year the company dropped “Sports” from its name as it looked to broaden beyond sports. The company, which has historically specialized in unscripted sports programming, has followed up that expansion effort this year. In January Whistle acquired New Form, a studio that has a track record of producing scripted and unscripted series for TV networks and streaming services, and then on October 3, Whistle announced that it is acquiring Vertical Networks, which is best known for producing mobile-only, vertical unscripted shows for Snapchat and also creates interactive shows for platforms like Eko.
Whistle has already seen its efforts to broaden its programming portfolio pay off. Thanks to its expanded production capabilities, the company now has a relationship with Quibi in which Whistle is producing scripted and unscripted shows for the mobile streaming service and is also working with Quibi to create shows to help with the service’s marketing strategy, according to Cohen.
“The ability for Whistle to have all of these capabilities is great for the distributor because I don’t think the distributor wants to have hundreds of partners. I think they’d rather have 10 or 20 great partners that can be more full service,” he said.